Economic complexity: conceptual grounding of a new metrics for global competitiveness

A. Tacchella, M. Cristelli, G. Caldarelli, A. Gabrielli, L. Pietronero

Journal of Economic Dynamics and Control 37, 1683 (2013)

#economiccomplexity #forecasting #macroeconomics

We introduce a novel method to define a self-consistent and non-monetary metrics for the competitiveness of countries.

The availability of data corresponding to the products exported by all countries provides an excellent dataset to test economic ideas and extracts new information about the process of economic development. The matrix of countries and exported products shows a marked triangular structure instead of the block-diagonal structure expected from Ricardian arguments of specialization. This observation points to the fact that diversification is instead the dominant effect in the globalized market. We discuss how to define a suitable non-monetary metrics for the value of diversification and the effective complexity of products. We discuss in detail the previous proposed approaches to assess this challenge and their limitations. We introduce a new approach to the definition of these metrics which seems to overcome the previous problems and we test it in a series of model systems.